Now we go to our program guest, the Shadow Treasurer Joe Hockey who joins us from our Sydney studios. Good morning. Welcome.

JOE HOCKEY, SHADOW TREASURER: Good morning, Barrie.

BARRIE CASSIDY: It seems you got your way on the mining tax. It is not going to hurt the mining companies at all, at least not up until now.

JOE HOCKEY: It does hurt them because it costs millions of dollars in accounting fees. In fact, Atlas Iron, a mid-tier iron ore company admitted this week that they're spending up to $2 million on compliance procedures and costs for a tax that they don't have to pay.

And it has a big impact on our sovereign risk, Barrie. Of course, our international reputation has been affected by the introduction of a tax on mining. There is no doubt about that.

BARRIE CASSIDY: But the first instalment was zero. You've been saying it was going to have a devastating impact on them. It is not going to have a devastating impact at that rate.

JOE HOCKEY: Hang on, you're taking a point of time. This has had five different versions, this mining tax.

The original version under Kevin Rudd was going to raise $11 billion in just two years. It was fully estimated to raise $23 billion. Of course that would have an impact on the mining industry. And that's when we said it would have a devastating impact.

Now, four versions later and seven different sets of numbers later, it is raising zero. But you know what is interesting, Barrie; the contingent liability associated with this. If the mining companies pay zero this year in mining tax, they will have an accrued liability from the Commonwealth for the refund of royalties for this year that will carry over to next year.

So the bottom line is this tax may raise no money for many years to come.

BARRIE CASSIDY: You don't think it will raise any money over the next 12 months?

JOE HOCKEY: Well, that is up to the mining companies. To be honest, not even the Liberal Party believed that there wouldn't be a dollar paid. Not even we believed that, Barrie. Seriously, anywhere in the world, I have never heard a tax that raises no money. I mean, but the incompetence of the Labor Party is at a whole new level.

BARRIE CASSIDY: You're saying then that the big miners won't be any more profitable over the next three quarters than they were in the last quarter?

JOE HOCKEY: Well it depends. It depends on how it is structured within the mining companies and of course it depends on the individual mines and the liabilities associated with individual mines.

But quite frankly if they are not going to pay money in the first quarter - and Wayne Swan has refused to confirm or deny it, which is extraordinary because of his trickery. But if they don't pay anything in the first quarter it is highly likely they won't be paying anything in the remaining three quarters.

BARRIE CASSIDY: But in the end, doesn't this undermine the fairness of it, that they only pay the extra taxes if they make bigger profits. That is the point of it, it is a profits based tax.

JOE HOCKEY: Hang on, hang on ... Well why is the Government spending billions of dollars against a profits based tax that is so volatile?

BARRIE CASSIDY: No, but that's a different point. You criticised the tax itself.

JOE HOCKEY: It isn't a different point. We criticised the package, Barrie. We criticised the tax but we criticised the package. The Government has committed billions of dollars in expenditure against a tax that is so volatile.

And I don't know how many times over the last three years I have been saying that. If the mining boom comes to an end, and if the money isn't there, you have this structural hole in the budget because the Government is spending and spending mining tax that may not be there. I have been proven right.

BARRIE CASSIDY: And my point is, if the money is there, then what's wrong with a profits-based tax?

JOE HOCKEY: You already have a company tax that the miners pay, which is a profits-based tax. On top of that they're paying royalties - and increased royalties - to the states. It is not as if they're not paying a profits based tax. This is a third tax that is going to apply and now we know it is not raising a zach!

BARRIE CASSIDY: On the other part out of the mini budget, the so-called mini budget, when they brought forward the company tax that is now two-monthly, the Coalition government changed the rules so that businesses paid their tax quarterly rather than annually. Did that cost the companies any money at the time?

JOE HOCKEY: Well, there was a trade-off. The overall trade-off out of our entire tax package was the abolition of financial institutions duty, the abolition of wholesale sales tax, the introduction of a GST, the abolition of two or three other taxes like bed taxes and so on.

Out of the entire package, there was a structure, there was a strategy. You know what, Barrie, this Government has no fiscal strategy. It has no taxation strategy. It is simply making it up as it goes along full stop. There is nothing else to add.

BARRIE CASSIDY: So there was a trade-off, what, because asking them to pay quarterly rather than annually costs them money. It costs them money, why? Because that's money they can't invest?

JOE HOCKEY: Well it brings money forward, it affects the capital and obviously some of the liquidity of various companies. But the bottom line here is Wayne Swan is collecting $8.3 billion extra in his forward estimates.

Now if Wayne Swan's collecting $8.3 billion extra, someone else is $8.3 billion worse off. It is not hard to work out. Obviously, it affects the liquidity and capital structures of a number of companies. It is the only difference between Wayne Swan promising, promising, a surplus in an election year and actually delivering a deficit.

BARRIE CASSIDY: So you will then oppose this measure when it comes before the Parliament?

JOE HOCKEY: We're still in discussions with the business community about it. Frankly, the business community has given up on Government. I mean, to walk away from the business tax working group is an extraordinary sign that the business community has given up on the Government.

And why wouldn't they? They had the Ken Henry review on taxation and that went virtually nowhere. Then they had a tax summit and then you had the business tax working group, all of these things are coming to a cul de sac and the Government clearly has no taxation policy other than to hit Australians harder.

BARRIE CASSIDY: But you don't know whether you will oppose it or not. You are reserving the right to criticise it and support it?

JOE HOCKEY: Our job as an Opposition, Barrie, is to point out the issues, to raise public awareness, to consult with the individuals concerned ...

BARRIE CASSIDY: And oppose it if you don't like it

JOE HOCKEY: ... consult with the party room and if necessary to vote against it. That is the way a good Opposition works. We actually have a structure, Barrie, and it is a good structure and it works appropriately.

BARRIE CASSIDY: On the baby bonus then, reduced from $5,000 to $3,000. You have likened that to the Chinese birth control system ...

JOE HOCKEY: No, I didn't do that. That's-that's just ...

BARRIE CASSIDY: Yes, you did.

JOE HOCKEY: It is a misrepresentation, Barrie. I said social policy ...

BARRIE CASSIDY: You misrepresented yourself, if that is the case. You said 'it worked well in China, didn't it?'

JOE HOCKEY: Yes, what works quite well? They don't have a baby bonus in China, do they, Barrie? So you're misrepresenting me there.

What I actually said was 'social engineering between children out of the same family'. You can liken that- various countries have tried it.

The bottom line is in Australia we have never had financial penalties associated with a birth of a second or third child. That has never existed. We have never had that.

BARRIE CASSIDY: What is the financial penalty? They are getting a bonus - a bonus of $3,000 and you say that is penalising them. How is a penalty to give somebody $3,000?

JOE HOCKEY: Well, it is a reduced payment for a second or third child.

BARRIE CASSIDY: That's not a penalty. That's not a penalty.

JOE HOCKEY: Oh, okay ... No, no, no, okay. Well then on your assessment then they're not worse off so ...

BARRIE CASSIDY: I am not saying they're not worse off. They are better off than they would be if they didn't get the $3,000 bonus. You called it a penalty.

JOE HOCKEY: Of course they are. Of course they are. But actually, for the money that they were going to receive for a second or third child ...

Jenny Macklin just put out an alert to the professional organisation for the birth of children saying "Please don't facilitate people having the early birth of a child to get increased payments".

So I am sorry, I am ... You know, that explains it all. If there is no penalty involved or there is no ... uh, you know ... And this is the second time they have been through it, Barrie.

But, look, whatever the case, the bottom line here is the Government never said it was going to reduce the baby bonus like this previously. It is making it up as it goes long and it's doing it on all the policies.

BARRIE CASSIDY: So again, so you will oppose this one then or do you reserve the right to criticise it and support it?

JOE HOCKEY: We will speak to our party room about it. But I'd just say this, Barrie, we have been very responsible in Opposition about all of these things. I mean, we have been very up front with the Australian people. Suggestions of hypocrisy are outrageous, given that we said we could not support and would oppose the $900 payment to families.

And in May this year, on the school kids bonus, we said we would oppose it and repeal it and the Government got up every time and said "Oh this party, the Liberal Party is opposed to families".

Well we've been absolutely true to our word on the need to rein in entitlements. We have done it with our actions as well as our words but the suggestion somehow that when the Government has an ad hoc approach to taking money out of the pockets of families, we should just have a gut reaction to support it without question, we're not in that business.

BARRIE CASSIDY: So you will get rid of the school kids bonus, that's what - $400 for primary school kids and about $800 for the secondary school kids. That goes?

JOE HOCKEY: We've said - we've said ... It is funded out of the mining tax and there is no mining tax, Barrie.

BARRIE CASSIDY: So what happens, do you return to the old tax refund system?

JOE HOCKEY: No, we have said what we have said. We will oppose it and you will see our policies before the next election.

BARRIE CASSIDY: But they won't be able to go back to the original arrangement either, where they claim money through the taxation ...

JOE HOCKEY: We haven't said that. We haven't said that. We have said that we cannot afford the school kids bonus. We have been emphatic about that. And I would hope everyone listens when we say that we cannot support an initiative and we will repeal it if we get into Government.

BARRIE CASSIDY: Yes, sure, I want to be clear on this though because the kids bonus replaced a previous system where you can make claims, keep receipts and make claims back through the taxation system. What I am asking is whether that goes as well?

JOE HOCKEY: Well that has gone already. It's gone already.

BARRIE CASSIDY: So that's ...

JOE HOCKEY: We will go to the next election.

BARRIE CASSIDY: So that stays?

JOE HOCKEY: Yes. And there are other things that have been funded by the mining tax that we have opposed.

You see Barrie, we actually believe in principles, we believe in consistency. So, for example, when the GST package was introduced by the Howard government - because you went back to it - when it was introduced, Labor opposed the GST but supported the tax cuts funded by the GST.

In our case, we've said we cannot support tax cuts funded by the mining tax or payments supported by the mining tax because we do not support the mining tax. So we are entirely consistent in our principles.

BARRIE CASSIDY: When you said in Europe that there was a need to have an assault on this age of entitlements, then to an extent you think it applies to Australia, there is a need to look at entitlements in Australia?

JOE HOCKEY: I have always said we need to be wary of it. Always need to be wary of it.

What does that mean? It means that we cannot afford a school kids bonus that is paid by non-existent mining tax. I gave a speech before the budget in May. I really wish people would listen to me sometimes.

So when I gave the speech back in April, and in May they promised the school kids bonus and they promised changes to Family Tax Benefit Part A and a range of other things, we said 'we cannot afford this because the mining tax will not raise money' and we're right.

BARRIE CASSIDY: Well we do listen to you and you've said during the week the economy is flatlining. Now, it's growing. It's not flatlining.

JOE HOCKEY: Well flatlining, the Government said it was meant to be trend growth. It is now below trend growth. Let's be fair dinkum.

The Government forecast 3 per cent growth this year. If you look at the major banks forecast, I don't think any of them come anywhere near 3 per cent. In fact the lowest one is 2.3 per cent.

So you know, flatlining is not ... if it was zero it would be a recession, effectively. No, I didn't say that ...

BARRIE CASSIDY: No, if it was zero it would be flatlining. That is what it means.

JOE HOCKEY: You know what - Well, what's trend growth mean, Barrie?

BARRIE CASSIDY: That is a very different thing. I would have thought flat lining ...

So you know ... you can get down to these ... You can interpret it whatever you want. The bottom line is the Government is forecasting 3 per cent growth and the consensus forecasts are below 3 per cent.

BARRIE CASSIDY: It might have gone unnoticed, except Tony Abbott in the same week promised to get the economy growing again. It has been growing for 21 years.

JOE HOCKEY: Well it should be growing better than trend ... Look, can I tell you, Barrie, this Government has bet everything on above trend or trend or above trend growth. They are not delivering. They are not delivering.

That is why the Reserve Bank is reducing interest rates, not because the economy is doing well but because the economy is under pressure. This Government's making it worse by having no economic strategy, no taxation strategy, no plan to help to grow Australia. Nothing there.

BARRIE CASSIDY: If all that is true, why do you think Julia Gillard is more popular than Tony Abbott?

JOE HOCKEY: I think Julia Gillard is exceptional with the spin. We're about to see it today with the Asian White Paper.

Unless there is substantial money associated with that paper, it is a waste of time. I mean, these guys get a gold medal at the reports and inquiries Olympics. That is what they deserve but they never actually deliver. If it is just more words from Julia Gillard today, without the massive commitments necessary to make it real, then we're wasting our time.

BARRIE CASSIDY: Do those polls, as opposed to what they say about the relative strengths of the two parties, the polls and what they tell you about Julia Gillard as opposed to Tony Abbott, do they bother you and is Tony Abbott's leadership safe no matter what the polls say now or into the future?

JOE HOCKEY: Yes.

BARRIE CASSIDY: Yes to what?

JOE HOCKEY: There it was two questions there. I answered the last one.

BARRIE CASSIDY: The first one was 'do they bother you' and the answer is yes?

JOE HOCKEY: Ha ha ha! No, I answered the second question.

BARRIE CASSIDY: Right.

JOE HOCKEY: Look, polls go up and down. From my perspective, you talked earlier about the Canberra election. I think the polls said we were going to do poorly in Canberra and we did very well. I think that is pretty consistent across the country at the moment.

From my perspective, what is of greater interest is what you hear on the streets. I went into the main street of the Labor seat of Chisolm in Victoria, a 5.7 per cent Labor seat last week, and I was literally mobbed in the same street. And people are saying you have to get rid of this Government. I hear you, we're doing our best.